Department for Promotion of Industry and Internal Trade (DPIIT) has notified establishment of Credit Guarantee Scheme for Startups (CGSS).
The credit guarantee cover under the scheme would be transaction-based and umbrella- based. The exposure to individual cases would be capped at Rs. 10 crore per case or the actual outstanding credit amount, whichever is less.
The scheme will provide credit guarantees to loans extended by Scheduled Commercial Banks, Non-Banking Financial Companies and Securities and Exchange Board of India (SEBI) registered Alternative Investment Funds (AIFs).
CGSS is aimed at providing credit guarantee up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers viz. start-ups as defined in the Gazette Notification issued by DPIIT and amended from time to time.
With respect to transaction-based guarantee cover, the guarantee cover is obtained by the MIs on a single eligible borrower basis. Transaction-based guarantees will promote lending by Banks/ NBFCs to eligible start-ups. The extent of transaction-based cover will be 80 per cent of the amount in default if the original loan sanction amount is up to Rs. 3 crore, 75 per cent of the amount in default if the original loan sanction amount is above Rs. 3 crore, and up to Rs. 5 crore, and 65 per cent of the amount in default if the original loan sanction amount is above Rs. 5 crore (up to Rs. 10 crore per borrower).
A dedicated credit guarantee for DPIIT recognised start-ups will address the issue of unavailability of collateral free loan and enable flow of financial assistance to innovative start-ups through their journey to become full-fledged business entities. The scheme further reiterates Government’s focus towards promoting innovation and fostering entrepreneurship for making Indian start-up ecosystem the best in the world.
With the objective of mobilising domestic capital for Indian start-ups, CGSS will complement the existing schemes under Startup India initiative that is Fund of Funds for Startups and Startup India Seed Fund Scheme.
